The Scientific Research and Experimental Development (SR&ED) program is a federal tax incentive program to encourage Canadian businesses of all sizes and in all sectors to conduct research and development (R&D) in Canada that will lead to new, improved, or technologically advanced products or processes. The SR&ED program is the largest single source of federal government support for industrial research and development.
Claimants can apply for SR&ED investment tax credits for expenditures such as wages, materials, machinery, equipment, some overhead, and SR&ED contracts.
It should be noted that the CRA is responsible for administering the SR&ED program, while the Department of Finance is responsible for the legislation that governs it.
The SR&ED program gives claimants cash refunds for their expenditures on eligible R&D work done in Canada. *(excerpts from CRA web site)